Models, maths and macro: A defence of Godley

Critical Macro Finance

To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences.

The quote is, of course, from Piketty’s Capital in the 21st Century. Judging by Noah Smith’s recent blog entry, there is still progress to be made.

Smith observes that the performance of DSGE models is dependably poor in predicting future macroeconomic outcomes?precisely the task for which they are widely deployed. Critics of DSGE are however dismissed because?in a nutshell?there’s nothing better out there.

This argument is deficient in two respects. First, there is a self-evident flaw in a belief that, despite overwhelming and damning evidence that a particular tool is faulty?and dangerously so?that tool should not be abandoned because there is no obvious replacement.

The second deficiency relates…

View original post 1,038 more words

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s